A Cautionary Tale: Court Awards 12-Month Notice Period and Punitive Damages to 3-Year Employee
October 2, 2025
| By
Ryan Parry
Employment
Summary
In a recent summary judgment decision, the Ontario Superior Court of Justice (the “Court”) found that an employee with only three years and seven months of service was entitled to twelve months’ notice of termination. The Court further held that the employee was entitled to $57,740.55 in punitive damages.
The Court’s reasons in Carroll v. Oracle Canada ULC, 2025 ONSC 4889 (“Carroll”), serve as a useful caution to employers of the risks that can accompany the termination of even a short service employee and – perhaps more importantly – how such risks can be avoided.
The Facts
In Carroll, the plaintiff was employed in a specialized sales role, holding the title of Global Strategic Client Executive. In this position, the plaintiff earned a base salary of $180,000 plus significant commissions, resulting in gross annual earnings of over $700,000.
On June 30, 2023, the employer dismissed the plaintiff without cause as part of a restructuring. At the time of termination, the plaintiff was 61 years old with approximately three years and seven months of service.
The employer provided the plaintiff with four weeks of working notice, inclusive of the required three weeks pursuant to the Employment Standards Act, 2000 (the “ESA”). The employer further provided the plaintiff with payments representing commissions earned prior to the date of termination, but failed to account for commission payments owed during the three-week statutory notice period.
The plaintiff brought an action for damages arising out of the termination of his employment and moved for summary judgment. The plaintiff sought, in part, twelve months’ reasonable notice and punitive damages.
The Decision
Reasonable Notice of Termination
The Court held that the appropriate period of reasonable notice for the plaintiff was twelve months, based on the plaintiff’s base salary and commissions, calculated on an average of the three years preceding the termination.
While the employer argued that the plaintiff’s skills as a salesperson were highly transferable, the Court found that his specialization in the financial services industry and income level put him into a different category of more specialized employment, tending toward a longer notice period.
The Court also rejected the employer’s assertion that the plaintiff’s notice period should be reduced due to a failure to mitigate, by not applying for several internal sales positions available during the working notice period. The Court found that the employer had failed to identify available positions, the salary or terms of such positions, or the alleged supports that were provided to the plaintiff to assist in his job search efforts.
The Court also found that the letter of employment given to the plaintiff was more harmful than helpful. While the employer’s policy was not to provide letters of reference, the Court found that the letter was drafted in such a way that would leave the reader with the impression that the plaintiff was a mediocre employee. Of note, the Court highlighted that the letter did not specifically mention that it was the employer’s policy not to write letters of recommendation.
While the plaintiff had found comparable alternative employment eight months after his termination, the Court found it could be expected that it would take some time to establish new relationships and that the reasonable notice period could include this “ramp-up period”. As a result, the twelve-month notice period was unfortunately not reduced to reflect the plaintiff’s mitigation.
In terms of quantifying the commissions owed during the notice period, the Court based its calculation on the average commissions the plaintiff had earned in the three years before the termination. While the evidence indicated the plaintiff had earned higher than normal commissions leading up to his termination, there was no evidence provided about the likelihood of the plaintiff duplicating that exceptional performance in the second half of 2023.
Punitive Damages Award
The Court also awarded punitive damages due to the employer’s delay in paying commissions owed during the statutory notice period.
The Court found that the employer had attempted to rely upon a termination clause in the employment contract to limit the plaintiff’s entitlements – but that a similarly-worded clause had recently been struck down in a prior decision involving the company. The Court therefore held that the employer had adopted a “legally untenable position” in trying to pressure the plaintiff into a less favourable settlement position. The Court also found that the employer had all the necessary information to calculate and pay the commissions following the discovery process but nonetheless continued to withhold the commissions, seemingly without explanation.
The Court noted that punitive damages were only awarded in exceptional cases and require and independent, actionable wrong. The Court ultimately found that failing to pay statutory entitlements when due, while maintaining a legally untenable position that no common law notice was required, all without explanation, constituted such independent actionable wrong in the form of a breach of the duty of good faith in contractual performance.
In terms of quantifying the punitive damages, the Court followed its previous approach where statutory entitlements were withheld, awarding $57,740.55, representing 100% of the commissions owed during the statutory notice period.
Takeaways
The Court’s decision in Carroll serves as a cautionary tale respecting the potential consequences in terminating a short service employee in a specialized role, and also highlights the perils of failing to remit an employee’s statutory entitlements.
As acknowledged by the Court, any case involving a reasonable notice assessment is highly fact-specific. Employers should review employment contracts with high-earning employees regularly, particularly if those employees are largely commission-based, to ensure the enforceability of termination provisions or commission agreements.
This decision also serves as a reminder of the potential consequences that can follow if an employer does not provide an employee with their statutory minimums upon termination. An employee’s entitlements during the statutory notice period include all aspects of the employee’s remuneration, such as wages, commissions, benefits, and vacation pay. Timely payment of statutory entitlements is a way to mitigate any risk of exemplary damage awards.
Carroll also provides guidance as to how commissions are calculated during the statutory notice period in particular. The key question to ask is what the employee likely would have earned during the notice period had their employment continued.
Need More Information?
For more information or assistance with employee dismissals, or reviewing employment contract language, contact Ryan Parry at rparry@filion.on.ca or your regular lawyer at the firm.
